Running on Inequality

Last week, a White House official named Alan Krueger gave a speech in Washington about inequality. Krueger is a Princeton professor who specializes in labor economics, and the speech was dense with statistics and terms of art, but the headline was striking: inequality has made upward mobility difficult, if not impossible, for more and more Americans. And the present trend will only get worse. “The persistence in the advantages and disadvantages of income passed from parents to the children is predicted to rise by about a quarter for the next generation as a result of the rise in inequality that the U.S. has seen in the last twenty-five years,” Krueger said. “It is hard to look at these figures and not be concerned that rising inequality is jeopardizing our tradition of equality of opportunity. The fortunes of one’s parents seem to matter increasingly in American society.” Finally, he argued, inequality and the resulting lack of mobility pose a serious threat to economic growth.

In other words, whether you think it’s the result of vulture capitalism or the healthy workings of the free market, inequality is bad for the country, and it’s going to get worse.

In the first two years of the Obama Administration, Krueger had worked in the Treasury Department under Timothy Geithner. He’s an important figure in Ron Suskind’s “Confidence Men”—the guy at Treasury who worried about unemployment and urged a strong jobs program while Geithner and the White House were focussed on stabilizing the banks. Krueger told Suskind that Obama seemed to lose his clarity of vision during the first two years. “I think that happens to a lot of good people, in these times, when they come to this town. Our President may just be the most recent example. They think they’re seeing things clearly. But they’re living off the noise.”

It speaks well for Obama that those words didn’t keep Krueger from getting the job of chairman of the Council of Economic Advisers when it recently came open. The President has recently come around to thinking and talking more Krueger’s way. The speech on inequality, social mobility, and the decline of the middle class that he gave in Osawatomie, Kansas, last month was his clearest, strongest speech on the economy since becoming President. Those themes, backed by Krueger’s analysis and numbers, seem like the core of Obama’s re-election message.

Strange to say for a Presidency dominated by hard times, but Osawatomie was just the second major economic speech that Obama has given in office. The first came at the start of his term, back in April, 2009, at Georgetown. That speech, dubbed “the New Foundation,” was his effort to join together all of his domestic policy initiatives—health care, energy, education, financial reform, deficit reduction—under one heading. Playing off his Inaugural address, he attributed the recession to “a perfect storm of irresponsibility and poor decision-making that stretched from Wall Street to Washington to Main Street.” In other words, everyone was to blame for our problems. It was a fine speech, but you will search it in vain for the word “inequality.” You will not find any discussion of the eroding position of the middle class over the past few decades, or the decline in upward mobility, and the role these played in the creation of the credit bubble. Nor was there any mention of how powerful corporations and moneyed interests have played the game in Washington to their great advantage while the middle class shrank. Congress came in for some criticism, but only for being paralyzed by partisanship and the news cycle—not for doing the bidding of Wall Street. It was characteristic of the President’s stance in his first two years: high-minded, moralistic but in a soft-edged way, rising above the fray, refusing to name villains. He went out of his way not to acknowledge the reality and primacy of opposing interests, on opposing sides, let alone “class warfare.”

In the year Obama spent trying to get health-care reform through Congress, he never emphasized what a blow the law would strike against growing inequality—the first serious one in decades. (After Obama signed the Affordable Care Act, it was left to David Leonhardt, in a front-page column in the Times, to do the explaining.)

No one remembers the Georgetown speech. We’ll see if the Osawatomie speech fares any better. While it was a relief to hear Obama directly address the most important long-term problem in America, it came very late—maybe too late. It’s all too clear what a costly mistake it was for the President not to have claimed this ground from the start. By planting his flag on responsibility, not fairness—by failing to tell the story of the past few decades and refusing to assign blame—he rendered his policies faceless. He allowed struggling Americans to believe that the policies existed to serve something called the government—not them. At the same time, he allowed his enemies to portray him as an elitist.

This is what I’ll be watching in 2012: whether Obama can overcome the great skepticism that the middle sixty percent feel toward him and his program. Whether he can hold on to the ground he staked in Osawatomie, and put the burden of defending unequal opportunity and an unfair economic system on the other side. Judging from Monday night’s debate in Myrtle Beach, South Carolina, the Republicans are going to do their best to help him. When they weren’t tearing into Mitt Romney for looting companies and putting workers on the street, they were vowing to cut taxes on the rich and repeal any attempt to hold Wall Street accountable. In the same breath they denounced inequality and pledged to do everything in their power to increase it.